Comparing IFRS S2 Climate-related Disclosures with the TCFD Recommendations
The Financial Stability Board (FSB) had created the Task Force on Climate-related Financial Disclosures (TCFD) in 2015 to improve and increase reporting of climate-related financial information. Following the release of the Task Force’s 2023 Status Report, upon request of the FSB, the TCFD has been disbanded.
The requirements in IFRS S2 Climate-related Disclosures issued by the International Sustainability Standards Board (ISSB) integrate, and are consistent with, the four core recommendations and 11 recommended disclosures published by TCFD. The expansive work of TCFD has been converged and absorbed under the current IFRS foundation. IFRS recently published the comparison of IFRS S2 Climate related disclosures in line with TCFD recommendations (hence making it very clear that its neither duplication of efforts nor wasted efforts but a further strengthening of the message across the board that Climate disclosures are important and required in great detail.
Main summary:
IFRS recommendation uses different wording to capture the same information as the TCFD recommendations. In other words, in these cases, the requirements in IFRS S2 are described as being broadly consistent with the TCFD recommendations; •
IFRS requires more detailed information that is in line with the TCFD recommendations; and
IFRS where it differs from the TCFD guidance—but not from the TCFD overall recommendations—mainly by providing some additional requirements and guidance.
Detail comparison guidance is here
You will notice that this convergence works towards disclosures that have important pillars of
A). Materiality,
B). Validity,
C). Detail process explanation
D). seeks Info on usage of carbon credits,
E). Asks review of targets and whether target was derived using sectoral decarbonisation approach,
F). when to disclose Qualitative and Quantitative information
G). opportunity monitoring And,
H). show and tell information as of reporting dates without further delay
Particularly important is the following under:
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.IFRS S2 requires additional disclosures related to a company’s GHG emissions, including:
• a separate disclosure of Scope 1 and Scope 2 GHG emissions for (1) the consolidated accounting group, and (2) associates, joint ventures, unconsolidated subsidiaries or affiliates not included in the consolidated accounting group;
• Scope 2 GHG emissions using a location-based approach and information about any contractual instruments that is necessary to inform users’ understanding;
• Scope 3 GHG emissions disclosures, including additional information about the company’s financed emissions if the company has activities in asset management, commercial banking or insurance; and
• information about measurement approach, inputs and assumptions used in measuring Scope 3 GHG emissions.
In addition, IFRS S2 sets out a Scope 3 measurement framework to provide guidance for preparing Scope 3 GHG emissions disclosures. While IFRS S2 does not explicitly require a company to disaggregate its GHG emissions disclosures by the constituent gases, IFRS S1 includes requirements on disaggregation that would result in the disclosure of the constituent gases being required if such disaggregation provides material information.
